Focal erosions of cartilage and bone, which occur in the joints of patients with autoimmune inflammatory arthritis (i.e., rheumatoid arthritis (RA) and psoriatic arthritis [PsA]), represent the most debilitating and irreversible components of the disease. Over the last decade, seminal breakthroughs in our understanding of the cells and signal transduction pathways central to this process have been elucidated. From this information an established paradigm has been developed to explain focal erosions in which osteoclasts responsible for erosions are derived from bone marrow-derived myeloid precursors. Using the tumor necrosis factor (TNF) transgenic mouse model of erosive arthritis and anti-TNF clinical trials with PsA patients, we have demonstrated that systemic TNF induces the migration of CD11b+ osteoclast precursors (OCP) from the bone marrow into peripheral blood. These OCP can then enter the joints in blood vessels, translocate across the receptor activator of NF-kappaB ligand (RANKL) rich inflamed synovium, and differentiate into active osteoclasts. In direct contrast to this, systemic lupus erythematosus (SLE) patients appear to have an innate resistance to bone resorption. Our hypothesis to explain this phenomenon is that systemic interferon-alpha (IFN-alpha) diverts the bone marrow-derived myeloid precursors away from the osteoclast lineage and stimulates their differentiation into dendritic cells (DC). In support of this model, several labs have used microarray analyses to define the IFN-induced transcriptome in peripheral blood mononuclear cells (PBMC) from SLE patients. Here we propose the hypothesis that systemic TNF induces osteoclastic differentiation of PBMC in PsA patients that correlates with their erosive disease, and that the innate immune TNF/IFN axis in patients with autoimmune disease dictates their erosive phenotype. To demonstrate this, we injected wild-type C57B/6 and TNF-Tg mice with poly I:C, which is known to induce systemic IFN responses, and show its dominant effects on increasing the number of circulating CD11b+/CD11c+ precursor dendritic cells (pDC), concomitant with a dramatic reduction in CD11b+/CD11c- OCP. Thus, systemic factors produced by autoimmunity have a dramatic impact on active myelopoiesis and bone homeostasis.